The solar industry is growing rapidly due to global climate change concerns and favorable government policies. The transition to renewable energy sources is enhancing its prospects. Given this backdrop, it could be wise to add solar stocks JinkoSolar Holding Co., Ltd. (JKS), iSun, Inc. (ISUN), and SPI Energy Co., Ltd. (SPI) to one’s watchlist.
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s shaping the solar industry’s prospects.
Solar power is available in abundance around the world. It is crucial for reducing greenhouse gas emissions and combating climate change. It drives electric cars, heats homes, generates electricity, and powers factories. The global solar energy market is expected to grow at a CAGR of 11.5% to reach $215.90 billion by 2030.
However, solar stocks have faced challenges over the past year, as is evident from the Invesco Solar ETF’s (TAN) negative 30.5% returns year-to-date versus the S&P 500’s 23.3% increase. Despite the underperformance, the solar industry's long-term prospects as an energy source remain promising.
During the third quarter of 2023, the U.S. solar industry experienced a notable 35% year-over-year increase, installing 6.5 gigawatts-direct-current (GWdc) capacity. Projections indicate that the U.S. is set to add a record-breaking 33 GW of solar capacity in 2023.
Notably, at COP28 in Dubai, 100+ countries committed to tripling global renewable energy capacity by 2030, targeting at least 11,000 GW, exceeding Bloomberg NEF's 9,000 GW estimate. Ember predicts a record 500 GW of renewable capacity will be added globally in 2023 and also highlighted the necessity of a 17% annual growth rate to meet the 2030 goal of tripling the global renewable capacity.
Furthermore, the Inflation Reduction Act (IRA) showcased significant results in mid-August, with companies announcing over $110 billion in new clean-energy manufacturing investments since the legislation became law. The White House reports over $10 billion allocated to solar manufacturing within this total.
Considering these conducive trends, let’s analyze the fundamentals of the three Solar stocks, beginning with the third from the investment point of view.
Stock #3: JinkoSolar Holding Co., Ltd. (JKS)
Headquartered in Shangrao, the People’s Republic of China, JKS designs, develops, produces, and markets photovoltaic products. The company offers solar modules, silicon wafers, solar cells, recovered silicon materials, and silicon ingots. It also provides solar system integration services and develops commercial solar power projects.
On October 25, 2023, JKS’ affiliate signed a supply agreement to provide 3.8 GW of N-type Tiger Neo modules for ACWA Power's projects in Saudi Arabia, the 1,581MWp Al KAHFAH, and the 2,257MWp AR RASS 2. These modules offer enhanced efficiency and reliability compared to conventional panels.
Robin Li, General Manager at JKS, Middle East and North Africa (MENA), said, "ACWA Power continues to be the world's largest private water desalination company and also a pioneer in green energy transition. We are excited to be expanding our MENA footprint and engaging in a more diversified and innovative cooperation with ACWA Power."
In terms of the trailing-12-month EBIT margin, JKS’ 6.17% is 29.3% higher than the 4.77% industry average. Likewise, its 0.97x asset turnover ratio is 57.3% higher than the 0.62x industry average. However, the stock’s 16.54% trailing-12-month gross profit margin is 66% lower than the 48.67% industry average.
JKS’ total revenues for the third quarter ended September 30, 2023, rose 63.1% year-over-year to RMB31.83 billion ($4.45 billion). Its gross profit increased 99.7% year-over-year to RMB6.13 billion ($856.26 million). Also, its net income attributable to JKS and net income attributable to JKS per ADS came in at RMB1.32 billion ($184.38 million) and RMB18.46, up 140.7% and 188.9% year-over-year.
On the other hand, its total operating expenses increased 4.5% year-over-year to RMB3.14 billion ($438.61 million).
Analysts expect JKS’ EPS for the quarter ending December 31, 2023, to increase 203.8% year-over-year to $2.51, while its revenue for the same quarter is expected to decrease 5.1% year-over-year to $4.18 billion. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 7.7% to close the last trading session at $32.16.
JKS’ POWR Ratings are consistent with this uncertain outlook. It has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a C grade for Growth and Quality. Within the Solar industry, it is ranked #4 out of 20 stocks. To see JKS’ Value, Momentum, Stability, and Sentiment ratings, click here.
Stock #2: iSun, Inc. (ISUN)
ISUN is a solar energy company that provides design, development, engineering, procurement, installation, storage, and electric vehicle infrastructure services for residential, commercial, industrial, and utility customers in the United States. It also provides electrical contracting services, data, and communication services.
On October 19, 2023, ISUN announced a strategic partnership with Cleantech Industry Resources, LLC, providing low-cost services and growth opportunities for ISUN’s turnkey EPC business.
Jeffrey Peck, Chairman and CEO at ISUN, said, “This new partnership allows iSun to expand our access to developmental assets that will fuel our project backlog for years to come, based upon CIR’s estimated pipeline of 5.25 GW, while also enabling us to more efficiently and cost-effectively move forward on our current pipeline of solar projects assets under development.”
In terms of the trailing-12-month asset turnover ratio, ISUN’s 1.13x is 40.9% higher than the 0.80x industry average. However, its 21.17% trailing-12-month gross profit margin is 30.1% lower than the 30.28% industry average. Its 2.13% trailing-12-month levered FCF margin is 64.8% lower than the 6.07% industry average.
ISUN’s earned revenue for the third quarter ended September 30, 2023, increased 46.8% year-over-year to $27.91 million. On the other hand, its operating loss narrowed 63.4% year-over-year to $1.78 million. In addition, its net loss and adjusted EPS narrowed 54.4% and 88.9% over the prior year quarter to $2.25 million and $0.02, respectively.
Street expects ISUN’s revenue for the quarter ending December 31, 2023, to increase 8.3% year-over-year to $28.06 million, while its EPS for the same quarter is expected to remain negative. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has declined 86.3% to close the last trading session at $0.18.
ISUN’s bleak prospects justify its overall rating of C, which translates to Neutral in our proprietary POWR Ratings system.
It is ranked #2 in the same industry. It has a C grade for Value, Sentiment, and Quality. Click here to see ISUN’s Growth, Momentum, and Stability ratings.
Stock #1: SPI Energy Co., Ltd. (SPI)
SPI provides photovoltaic and electric vehicle (EV) solutions for business, residential, government, and utility customers and investors in Australia, Japan, Italy, the United States, the United Kingdom, and Greece. The company offers engineering, procurement, and construction services to independent power developers, producers, and commercial and industrial companies.
In terms of the trailing-12-month asset turnover ratio, SPI’s 0.92x is 49.2% higher than the 0.62x industry average. However, its 1.59% trailing-12-month Capex/Sales is 32.1% lower than the 2.33% industry average. In addition, the stock’s 13.29% trailing-12-month gross profit margin is 72.7% lower than the 48.67% industry average.
SPI’s net revenues for the fiscal third quarter ended September 30, 2023, increased 31% year-over-year to $55.90 million. Its operating income came in at $1 million, compared to an operating loss of $10 million in the year-ago quarter.
On the other hand, its net loss attributable to shareholders of SPI and loss per share narrowed 85.8% and 87.5% year-over-year to $1.90 million and $0.06, respectively.
For the quarter ending December 31, 2023, SPI’s revenue is expected to increase 24.2% year-over-year to $58.60 million. However, its EPS for the same quarter is expected to remain negative. Over the past month, the stock has gained 43.7% to close the last trading session at $0.99.
SPI’s uncertain outlook is reflected in its POWR Ratings. It has an overall rating of C, which translates to a Neutral in our proprietary rating system.
It has a C grade for Value and Stability. Within the Solar industry, it is ranked #1. To see SPI’s ratings for Growth, Momentum, Sentiment, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
JKS shares were trading at $33.82 per share on Thursday morning, up $1.66 (+5.16%). Year-to-date, JKS has declined -13.59%, versus a 24.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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